Options Are a Perfect Way to Leverage Risk & Generate Income

The economic news out of Europe, China, Japan, has not been encouraging. This, coupled with fears of an overvalued stock market and potential Federal Reserve rate hike, is weighing on investor sentiment.

As a result, the current market risk is high for a stock market correction. That being said, investors seeking income can leverage the risk by using “options.” While the majority of portfolios are made up of stocks, options—either call options (betting the underlying stock price will rise) or put options (betting on the stock’s downside)—have become a popular investing strategy.

But options are not for the inexperienced investor. It takes discipline and a comprehensive understanding of the markets. As long as investors are aware of the risks associated with options, they can provide a solid hedge for profits.

Covered Calls

A covered call allows investors to collect cash up front in return for giving up potential gains on the underlying stock. With a covered call, you are selling someone else the option to buy a stock you currently own, at a set price and for a specific period of time.

Worst-case scenario, the stock climbs above the set price and the buyers of the option “calls” (buys) the stock from you. Best-case scenario, the call option doesn’t get used. You still get to keep your stock and collect the money for “writing” (selling) the option that wasn’t exercised.

Covered calls can allow an investor to generate a steady income stream from a portfolio and still benefit from capital gains. It can be effective in the current economic environment where the markets, while near record levels, are volatile. Covered calls can also be effective if the markets are trading in a tight range.

What’s also great about stock options is that investors can control a stock for a fraction of the price without actually owning it. One option contract translates into the right to buy 100 shares of the stock at a much lower cost.

Protective Put

A protective put is a little like an insurance policy in that it helps lock in profits on a stock should the markets experience a correction. A protective put is also a great investing strategy if you think the underlying sector could reverse. Those who love Internet, natural resource, or biotech stocks understand that this is not a rare occurrence.

If you think a stock you own is going to go down, you can get a protective put option on your own stock. If the stock goes down (within the specific time frame), the protective put goes up. You can hold onto the stock and sell the protective put option at a profit. The profit on the protective put will help offset the, hopefully, temporary decline in the price of the stock.

Protective puts work when the markets appear weak or if a stock makes major gains in a short period of time. After all, a stock can swing downward on profit taking just as quickly as it can upward.

Learn-To-Trade.com, Toronto’s Stock Options Experts

When it comes to stocks, there’s more to consider than just “buy low, sell high.” Being aware of different investing strategies, including options, can help investors take advantage of the stock market no matter what direction it’s going.

As the leading and oldest provider of stock market trading courses in Canada, Learn-To-Trade.com is led by licensed, industry professionals who can help you confidently manage your portfolio and make consistently profitable returns.

Learn-To-Trade.com’s stock market trading course will teach you how to read stock charts, about fundamental and technical analysis, teach you about risk management, and capital preservation. You will also learn about a number of investing strategies, including stock options, stock index trading, futures trading, commodities trading, and FOREX trading.

Learn-To-Trade.com also has a unique Lifetime Membership that allows you to re-attend any part of the program as often as you’d like.

To learn more about Learn-To-Trade.com’s stock market trading course, contact us at 416-510-5560 or by e-mail at info@learn-to-trade.com.

George Karpouzis is the co-founder of Learn-to-Trade and has been personally providing education and mentoring to over 3000 members since 1999. George has been trading in the stocks, options, futures and forex markets using technical analysis since 1986. With the help of advancements in trading technology the Learn To Trade program is now accessible worldwide. His background and passion for teaching brings an invaluable asset to our members. George is constantly striving to improve the program content and develop new strategic relationships for the benefit of the members. Add me to your G+

Testimonial 3

I wanted to let you know that I had taken your course in the fall of 2013. I took your advice and used demo accounts for the last quarter of 2013. I switched to real money trading account in the Near Year, when I finally felt comfortable. Following the lessons taught to me by you (don’t jump on a moving train, peaks and valleys, EMA..etc), I wanted to let you know that I have been successful beyond my own expectations. Thank you very much – taking the Learn-to-Trade course was, by far, the best decision I made in my business career.

Steven R

Learn To Trade

4.0

2014-08-20T02:56:18-04:00

Steven R

I wanted to let you know that I had taken your course in the fall of 2013. I took your advice and used demo accounts for the last quarter of 2013. I switched to real money trading account in the Near Year, when I finally felt comfortable. Following the lessons taught to me by you (don’t jump on a moving train, peaks and valleys, EMA..etc), I wanted to let you know that I have been successful beyond my own expectations. Thank you very much – taking the Learn-to-Trade course was, by far, the best decision I made in my business career.

https://www.learn-to-trade.com/testimonials/testimonial-3/

Joseph L

The past options and forex tutorials taught by George were very helpful. I find these tutorials invaluable for a busy person like myself. I was able to keep myself up to date and on track ready to continue the learning process. Thanks for all the help and keep up the great work.

Joseph L

Learn To Trade

4.0

2014-08-20T10:36:37-04:00

Joseph L

The past options and forex tutorials taught by George were very helpful. I find these tutorials invaluable for a busy person like myself. I was able to keep myself up to date and on track ready to continue the learning process. Thanks for all the help and keep up the great work.

https://www.learn-to-trade.com/testimonials/joseph-l/

Harley S

The course is amazing. Where were you 30 years ago?

Harley S

Learn To Trade

5.0

2014-08-20T10:37:39-04:00

Harley S

The course is amazing. Where were you 30 years ago?

https://www.learn-to-trade.com/testimonials/harley-s/

Partick M

I learned the basics I needed to trade successfully.

Partick M

Learn To Trade

4.0

2014-08-20T10:38:34-04:00

Partick M

I learned the basics I needed to trade successfully.

https://www.learn-to-trade.com/testimonials/partick-m/

Iouri G

I like making money. I’m very happy, so far so good

Iouri G

Learn To Trade

4.0

2014-08-20T10:39:27-04:00

Iouri G

I like making money. I’m very happy, so far so good

https://www.learn-to-trade.com/testimonials/iouri-g/

Akos B

I learned things it would have taken me years to figure out

Akos B

Learn To Trade

5.0

2014-08-20T10:40:05-04:00

Akos B

I learned things it would have taken me years to figure out

https://www.learn-to-trade.com/testimonials/akos-b/

Robert B

There is always someone ready to answer my questions.

Robert B

Learn To Trade

4.0

2014-08-20T10:40:59-04:00

Robert B

There is always someone ready to answer my questions.

https://www.learn-to-trade.com/testimonials/robert-b/

Uldus V

I was impressed with the course’s professionalism and enthusiasm.

Uldus V

Learn To Trade

5.0

2014-08-20T10:41:40-04:00

Uldus V

I was impressed with the course’s professionalism and enthusiasm.

https://www.learn-to-trade.com/testimonials/uldus-v/

Dean K

I wish I knew about trading as a business years ago!

Dean K

Learn To Trade

4.0

2014-08-20T10:42:24-04:00

Dean K

I wish I knew about trading as a business years ago!

https://www.learn-to-trade.com/testimonials/dean-k/

Peter P

Learn to Trade provided me with strategy, self-confidence and discipline

Peter P

Learn To Trade

4.0

2014-08-20T10:42:57-04:00

Peter P

Learn to Trade provided me with strategy, self-confidence and discipline

https://www.learn-to-trade.com/testimonials/peter-p/

Shelley P

I took your course in 2008 and loved it. Since then I have been using what I learned at Learn-to-Trade to nicely supplement my pension income. Wanting a carefree type of trading, I have for the most part just sold options and made a monthly income which is a nice addition to my pension. I know I never would have made this kind of trading income without Learn-to-Trade. Thank you!

Shelley P

Learn To Trade

5.0

2014-08-20T10:34:39-04:00

Shelley P

I took your course in 2008 and loved it. Since then I have been using what I learned at Learn-to-Trade to nicely supplement my pension income. Wanting a carefree type of trading, I have for the most part just sold options and made a monthly income which is a nice addition to my pension. I know I never would have made this kind of trading income without Learn-to-Trade. Thank you!

https://www.learn-to-trade.com/testimonials/shelley-p/

Amir

Hi George,

I just wanted to thank you again for the amazing work on the tutorials especially Options trading. Prior to joining, I had underestimated the quality of the trainings but they certainly far exceeded my expectations. Only I wish I’d found you 5-10 years ago!

Learn To Trade

5.0

2016-10-07T08:56:52-04:00

Hi George, I just wanted to thank you again for the amazing work on the tutorials especially Options trading. Prior to joining, I had underestimated the quality of the trainings but they certainly far exceeded my expectations. Only I wish I’d found you 5-10 years ago!